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Tuesday, July 8, 2014

BACK TO BASICS: Are you a trader?

Welcome to the first episode of 'Back to Basics' on VDM Trading. Hopefully it's going to be one of your valuable sources to become a better trader. This information is mainly for people who want to learn to trade the financial markets themselves ('DIY' traders), without the assistance of an adviser, so they retain complete control over their portfolio, and hopefully make profitable trades consistently.

Answer my first question, and let's see if it's worth your time.

Let's cut right to the chase. The first question I have to ask you: Are you a trader? This determines if trading is something you should be doing, depending on your character. Well, what do I think classifies as a trader. Someone who once bought some penny stocks a few years ago is theoretically a trader. But that's not the way I see it. In my opinion a trader has to go through the buy and sell experience, at least has basic knowledge and understanding of the financial markets and is able to make profitable trades consistently by acting according to his or her trading plan, not just beginner's luck.

If you are remotely interested in trading the financial markets you have probably already done some research on the internet. In fact, it might be a reason why you found this website about trading. Likely during your research you have also come across a lot of other websites that promise golden mountains, huge returns on your investment and 'sign up bonuses', usually while promoting their own products.

If you are able to see right through this nonsense, and are still excited to trade the financial markets, you have already come a long way. However, trading stocks, currencies (Forex) etc, doesn't have to be a 'day job' that classifies you as 'a trader'. In fact, don't quit your actual day job to become a trader. As a matter of fact, many (private) traders and investors, like myself, don't only trade the markets full time, but have something else going on the side as well. Don't you lose focus? I don't think so. I'm not saying 'trade whenever you feel like it and expect successful results'. You have to keep your finger on the pulse every day - while you still keep your 'day job'. You have to make time for it.

Are you still a trader?

In a perfect world, us traders envision ourselves to be wealthy and trade full time. Unfortunately that's not the case for the majority of us.

Those websites you may have come across I mentioned earlier, like brokers, automatic trading systems or other related websites solely exist with the goal in mind to fill their own pockets with your money. Especially beware of trading sites like 'Binary options' (don't worry if you don't know what that is yet) or the ones that offer signup bonuses, it sounds tempting to trade with real money, but it's highly likely that you'll lose your money very quickly. You may have a higher chance of making money in a casino. You may want to do some research, especially when it comes to which broker you're going to pick. That's right, although you're going to be a do-it-yourself trader, you still need a broker to execute your trades.

Research is key

(Self) education is key. It takes a lot of effort and time to gain even a basic understanding of the markets, and everything that's involved with it. Don't expect to learn this in a few weeks. And yes, sometimes it can be extremely boring. You have to be able to go through tons of information and filter out what's relevant, and what's just 'noise'. You have to be persisted and dedicated. Trial and error will ultimately decide your success. It's a tough job, but in the end you may be someone who can execute successful trades consistently!

Are you still a trader?

Roller coaster rides

Then there is the psychological aspect of trading, which is perhaps the most important one. Can you keep it together when you see your money plummet down along with the stock you chose? It's easy to say yes when you've never experienced it. However, when you're actually in the game, and you feel your heart racing in the back of your throat like your on a roller coaster, it's a whole new level! Especially when you haven't really perfected your trading strategy it can be a nail biting adventure. Expect to lose out on some of your trades, therefore it's never recommended to trade with money you can't afford to lose. Controlling your emotions is key. It takes time, and how it takes depends on what kind of person you are. Are you up for the challenge?

Are you still a trader?

Conclusion

If you are still excited about trading, after reading all the things mentioned above, there's a good chance you are a trader. It sounds funny, but many people believe they are traders and they're simply not. They may be really excited in the beginning, but once they face all the challenges that come along with trading, they quickly drop out. Trading can be fun, it's just how you perceive it. Once you have made a couple of trades, whether good or bad ones, you'll feel more confident and you'll learn from your mistakes.

Yes! If you're answer is yes to the question if you are a trader, well then at least we've sorted that out and we're able to move on to my next question:

After you know the answer to this question we can continue to actually learning to trade and formulate your business plan. In the meantime, if you want to already kind of want to get your feet wet and gain a basic understanding of how the financial markets work, check out this e-book:

I wrote this e-book VDM Trading: Trading Stocks in Volatile Times myself after I got frustrated by other trading (e)books that only left me more confused when I wanted to know more about trading myself six years ago. So, it's written by a trader for traders, and gives people who want to learn about trading stocks insight how the financial markets work. My e-book is packed with a wealth of information that's clearly written in plain English. After you're done reading this e-book you'll have a basic understanding about how the financial markets work and are one step closer to becoming a successful trader.

Check out this link to download, for a free preview or if you want more information about this stock trading e-book. Shameless self promotion is good from time to time. Hope you enjoy it :)

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Disclaimer:

All opinions expressed, trade recommendations/advice on this website are solely of John van der Munnik and are not affiliated with any investment firm or any other organization. You should not make an investment only based using this website VDM Trading for your trading needs without seeking help from your own financial advisor.